Accordion SI Post

Shell’s ethane cracker is scheduled to come online soon, producing up to 1.6 million metric tons of plastic pellets a year. The plant will produce this plastic by processing ethane, a component of the natural gas found in the Marcellus and Utica shale formations nearby.

Construction of the plant was Pennsylvania’s largest industrial project since World War II, according to Gov. Tom Wolf, and benefitted from the largest state subsidy ever – a $1.65 billion tax credit, plus various state and local tax breaks.

More than 8,500 construction workers, many from out of state, crowded Beaver County over the last few years to construct the plant. When it is finished, it will employ 600 permanent workers. 

The cracker will also be permitted to be a large polluter – the second biggest emitter of volatile organic chemicals in the state. Stricter air quality rules and an energy system that relies less on polluting coal have made the air in and around Pittsburgh healthier in recent years. Many now ask: will this plant reverse gains to air quality? 

To help address what the project will mean for the region, we asked for readers’ questions about the plant, and solicited help from experts to answer them.

Like all good questions, many of our readers’ queries were hard, if not impossible, to answer completely. Many wanted to know what the future holds for the plant and the region – things we can make educated guesses on right now but can’t know for certain. But these questions helped focus our attention on the new reality of western Pennsylvania as a petrochemicals hub.

Property values

• Q: I live in Brighton Township, Beaver County. How is the plant’s possible pollution, including light pollution, going to affect my home’s value?

  – Lori Boone, Brighton, PA.

   

   

  A: We put this question to David Passmore, a retired economics professor at Penn State who has studied the economics of the Shell plant on the regional economy.

  He said that studies show a variety of results on the impact industrial facilities have on nearby real estate values. “Concerns for some buyers might include the concern for air and water quality, the specter of health risks, distress about noise and congestion, and the possibility of hazardous events,” Passmore said. “The presence of pipelines, equipment, and other plant infrastructure can affect property values by detracting from the attractiveness of a locality.”

  In general, he said, studies have reported that real estate values are harmed by proximity to a major petrochemical plant. The further away from the plant, the lower the effect on home prices.

  One Louisiana study found “few effects on housing prices…over a 13-year period.” However, “values temporarily turned negative in the face of public notoriety resulting from a storage tank explosion. Just perception of risk, not necessarily the occurrence of a problem, can affect property values,” Passmore said.

  Passmore said not all industrial sites are created equal: how a plant is managed and how well problems at the plant are addressed can significantly affect nearby housing prices.

  “In one study, emergency planning and quick and competent responses to issues at a Superfund site helped reduce the impact on property values by instilling confidence that problems were under control and would be solved,” Passmore said.

  “Planning and response for the Shell complex are within the control of Shell, its regulators, and community responders. Your property is unique in its location and condition. Factors such as school quality, commuting time, or crime risk can affect housing values.” As always, he said, seek real estate advice from a reputable source in your area.

Jobs and taxes

• Q: How much is Pennsylvania paying per job per year in tax credits? How many jobs are being created, and how much will they pay? Would Pennsylvania have been better off just giving the money to that number of citizens in a “job lottery?”

  – Ira Beckerman, New Cumberland, Pa.

   

   

  A: Since the legislature passed the $1.65 billion tax break for Shell in Pennsylvania in 2012, this question has loomed over the project: Could the state have put that money to better use?

  Again, we put this question to Passmore.

  He said that the question hits on what economists call “opportunity costs”, which “represent the forgone benefit that would have been derived from an option not chosen.”

  The total number of permanent workers at the plant will be around 600, according to Shell. “A broader impact is likely because Shell will purchase from local suppliers, and local Shell workers will spend some of their earnings with local merchants,” Passmore said.

  By his “rough” estimate, not counting for inflation, Passmore figures the state will spend $122,000 to $165,000 per job per year. (That’s not including the workers hired to build the plant).

  Passmore said whether that’s worth it is complicated by the question of whether the plant would have been built regardless of the credit. Shell has said the answer to that question is no.

  “I can tell you, with hand to my heart, that without these incentives, we would not have made this investment decision,” a Shell executive said in 2016.

  Gov. Tom Corbett, who championed the tax credit for Shell, said at the time, “When you’re looking at the investment, you have to look at what it would have cost us had we done nothing, had we let these businesses go.”

  As a general rule, Passmore says that “evidence is thin” that state and local tax breaks for private companies fosters economic growth.

  “State governments prefer not to conduct rigorous evaluations of the costs and benefits of tax expenditures used to incent(ivize) site location,” Passmore said. He believes that is true of the Shell tax credits.

  “Recent research indicates that in 9 out 10 cases, firms receive a tax incentive for a location decision they would have made, even if no incentive had been provided.”

  A Shell-funded economic study, which looked only at benefits of the plant, found that it would result in an additional $3.7 billion in statewide economic impact per year. The study predicted the state would get an estimated $23 million in increased income taxes during the lifetime of the plant. (The state would be giving up to $66 million in tax credits to the project.)

  Another study of the plant, by the progressive Ohio River Valley Institute, tells another story. The report found that while the plant was under construction, the county’s economic output and wages grew. But it found that the county still lost population, and that indicators like jobs and poverty levels in the county lagged behind state and national trends. “So far,” the report said, “prosperity has not arrived.”

Royalties

• Q: Will the opening of the cracker plant increase my gas royalties?

  – Stacy McConahy, Pulaski, Pa.

   

   

  A: The ethane that will go into the plant inevitably will come from the thousands of fracked gas wells that have been drilled in the region in recent years.

  We talked to a number of experts about this question, which requires a little speculation about the future of oil and gas prices. “The only way royalties would increase on an existing lease is for an increase in the price of natural gas/ethane to occur,” said Dave Yoxtheimer, assistant research professor and extension associate for the Marcellus Center for Outreach and Research at Penn State University.

  “Shell’s ethane cracker could have an effect on the ethane market regionally if demand goes up and supply remains steady, but ethane supply could increase due to greater production and offset the demand, thus leaving prices relatively flat. So it’s really just classic supply and demand at work.”

  Yoxtheimer’s colleague, Thomas Murphy, director of the Penn State Marcellus Center for Outreach and Research, said that on its own, the ethane cracker probably wouldn’t impact royalties much.

  “The reality is that the price is not typically driven by one local company unless it’s an incredibly large purchase of gas,” Murphy said.

  Murphy said bigger events, like the war in Ukraine and the resulting disruptions to Russian oil and gas supplies, are likely to have a bigger impact.

  “If you’re looking at a very localized level, you can see some local factors that could influence price and the Shell plant could be part of that. But that said, it’s not going to be a major driver.”

  Those royalty holders in southwest Pennsylvania, where the natural gas coming out of fracked wells is high in ethane, could conceivably see more of an increase than those in areas with less ethane, like Northeast Pennsylvania.

  Darryl Rogers, vice president of Midstream Oil & Natural Gas Liquids for S&P Global said the cracker would marginally increase the demand for ethane in the region, by about one percent. But the region already has a surplus of ethane that is not being used by chemical manufacturers. About 300,000 barrels a day of ethane in the Northeast is currently “rejected” — placed into the natural gas stream to be used as fuel. “And (the Shell plant) is going to take about 100,000 of it. So we’re still going to have a lot of rejection that’s going to fuel,” Rogers said.

  As more ethane is removed from the fuel stream, that production will be made up somewhere else, Rogers said.

Air quality

Q: Pittsburgh already has some of the worst air quality in the country. What will the company do to ensure this facility doesn’t make the air pollution in our region worse?

– Brendon Slotterback, Pittsburgh

Q: I’ve read about cancer alley in (Louisiana) and other areas where cracker plants are located. We have significant numbers of pediatric asthma in western Pa. Are all lung conditions going to get worse when this plant is running at full capacity?

– Michael Mannion, Pittsburgh

Q: Shell states in the Shell Risk Assessment submitted to the DEP on Jan. 28, 2015 that 55 “Compounds of Potential Concern” will be emitted by the plant once it goes into operation. Many of these are carcinogens. What can be said from a scientific and air quality perspective about air quality?

– Debra Smit, Pittsburgh, The Breathe Project

• Q: Who will be monitoring pollution from this site? And how will it be regulated? Some claim it will generate $3.7B per year in total economic value, but what are the total indirect costs in terms of health and environmental impacts?

  – Ryan Walsh, Pittsburgh

   

   

  A: Air quality was the most common topic readers wanted to know about. Southwestern Pennsylvania has long failed to meet federal air quality guidelines. But because of declining use of coal and tighter air pollution rules, the area around Pittsburgh is getting cleaner.

  That still doesn’t mean the air in Pittsburgh is safe, says Deborah Gentile, allergy and asthma specialist with East Suburban Pediatrics near Pittsburgh and Medical Director at Community Partners in Asthma Care.

  “The World Health Organization states that there is no level of air pollution that is safe,” Gentile said.

  Gentile said the EPA’s current air pollution standards rely on older data, and newer studies show that air pollution is harmful at lower levels than EPA standards allow. For that reason, the EPA’s scientific advisory panel has asked the agency to set tougher standards for particle pollution, which the agency could do as soon as next year.

  “Nearby residents are already experiencing high levels of air pollution and the levels can only go higher once the facility becomes operational,” Gentile said. “Nearby residents will bear the burden of air pollution and its adverse health effects for the benefit of others who are not in the impact region.”

  Air pollution causes a broad array of health problems; breathing in fine particles has been shown to cause increased mortality, as well as higher rates of heart attacks, high blood pressure, and stroke, Gentile said. It also causes lung problems, like asthma and COPD, cancer and dementia.

  Exactly how big Shell’s contribution to these problems will be is unclear, experts said.
  “It would take a crystal ball that I do not have,” said James Fabisiak, associate professor of environmental and occupational health at the University of Pittsburgh Graduate School of Public Health.

  “The region’s existing burden of pollution obviously means extra attention should be paid to potential environmental impacts. Shell will be one of largest…emitters of volatile organic compounds (VOCs) in the state.”

  These VOCs are a concern because some VOCs are classified as hazardous air pollutants, or air toxics, a broad class of airborne chemicals “known to cause cancer and other serious health impacts,” according to the EPA. Gentile said these chemicals on their own can cause irritation to the eyes, nose and throat, difficulty breathing, nausea, damage to the central nervous system and cancer.

  They are also a concern because once mixed in the air, they form ozone, a lung irritant that can cause health problems for people with asthma and other conditions, even at “relatively low levels,” according to the EPA.

  “The polluting potential is obviously high,” Fabisiak said. “But what impacts finally emerge depends on many factors.”

  Those factors include just how much pollution escapes the plant, weather patterns in Beaver County, and how close people are to pollution, said Albert Presto, research professor of mechanical engineering at Carnegie Mellon University.

  Presto said the impact of exposure to hazardous air pollutants depends on proximity. “In general, closer is worse, especially if you live downwind. As you get farther away, the effects get smaller.”

  Gentile said most experts consider a half-mile from a pollution source a distance where exposure to pollutants drops off, while others say 1-2 miles “is a reasonable estimate.” But the Ohio River Valley’s unique geography – whereby weather inversions can trap pollutants close to the ground — means “it is possible that more distant exposure could have adverse health effects.”

  Of the chemicals that Shell says it is likely to emit, Presto said benzene and formaldehyde, both carcinogens, have “the lowest threshold concentrations for health effects.”

  Shell estimates the plant could emit 1 ton of benzene per year.

  “If emissions are that large, it would make the cracker one of the largest benzene sources locally,” Presto said. “For example, in Allegheny County, the total benzene emissions from industrial point sources was 15 tons in 2017, with around 13 of those tons coming from Clairton coke. So a 1-ton source would be pretty high up on the local list. However, the numbers are the potential to emit and not necessarily the expected emissions.”

  Outside of these ‘air toxics’, the plant could also push air pollution into places that haven’t seen as much recently.

  “In general, the wind comes from the west or southwest, so the impact will be in areas of southern Butler and northern Allegheny county.” Presto also said that the plant’s impact on regional ozone levels is expected to be “minor”.

  As part of a settlement with environmental groups, Shell agreed to install and operate fenceline monitors at the plant to monitor emissions.

  As a condition of its state air quality permit, Shell is required to perform periodic air monitoring at the plant, report emergencies and malfunctions that may result in pollution events, operate continuous air monitors in parts of the plant with the greatest potential for air pollution, and monitor and fix leaks, said Pennsylvania Department of Environmental Protection spokesperson Lauren Fraley.

  The DEP, which oversees the plant’s air quality permits, also has air monitors stationed nearby, in Beaver Falls, Beaver Valley, Brighton Township, Hookstown, Potter Township, Vanport, and at the historic Fort McIntosh site in Beaver Borough.

  “The network is designed to provide DEP with data on air quality that average Pennsylvanians are exposed to on a daily basis,” Fraley said.

  Presto’s group at CMU has installed monitors near the cracker. And nearby residents have on their houses through the Purple Air Network.

  Ultimately, the plant’s impact on air quality depends on how tightly Shell keeps the chemicals it is processing from escaping the grounds of the Monaca facility.

  “It is an experiment in progress,” Fabisiak said. “We do expect some changes and they will not likely be found overnight. In the absence of a truly precautionary approach, which is often impractical, my advice would be if you are going to proceed with a high-risk, uncertain situation, then you better watch the hell out of it.”